Friday, October 18, 2013

Often rather quickly, I might add to that nugget of wisdom. Unbeknown to most people in this country - and certainly not reported in the mainstream media - is a Provision buried within the Continuing Appropriations Act of 2014 that - in effect - gives the President the ability to unilaterally waive the debt ceiling limit. Although Congress can override the President's move to lift the debt ceiling entirely, it would take a 2/3 majority in both Houses of Congress to block the action. That just would not be possible for all practical purposes.

It's amusing because when I first saw the news that a deal had been reached, I spent time scouring the internet to see if I could find out the new debt ceiling limit - i.e. how much more deficit spending could occur between now and February 7, the next drop-dead date. I could not find any numbers. Now I know why.

It looks to me, based on reading the Bill, that Harry Reid and Lisa Murkowski, who is on the Appropriations Committee, slipped the Provision into the legislation at a late stage in the game, when they realized that Boehner had caved in and the world was begging the Government to avoid default. I would bet a lot of money that probably 90% of the Congressmen who voted "yes" on the Bill didn't even know that the Provision was in there. I can guarantee that as fact.

In addition to this, there is no specified limitation on the amount of debt that can issued between now and Febraury 7th, when supposedly Congress reconvenes to vote on extending the debt ceiling limit. But now it appears as if February 7th is a meaningless date.

In essence, while most people feel a sense of relief over the passage of the Bill enabling to Government to pile on even more debt, the cold reality is that the legislation is a ticking time bomb for the U.S. dollar and it sets up the next stage of systemic collapse. I wrote an article for Seeking Alpha which lays out my analysis, which you can read here: LINK.

The truth is, the U.S. political and economic system is now akin to a runaway freight train in which the brakes have failed and it's headed toward a gorge where the bridge has collapsed.

James Grant's presentation, "The Monetary Revolution and the Visible Hand," will be broadcast live from the CFA Institute Fixed-Income Management conference in Boston on Thursday, 17 October 2013 at 1:30pm EDT. Mr. Grant will discuss ZIRP, QE, and Twist: lessons from history; interest rates: causes and consequences; and the tempo of the next bear bond market and differences in this interest rate cycle.

"On Wednesday, Congress reached a deal to disregard the $16.4 trillion limit on government borrowing and re-open the Federal government. The deal has been widely touted as a measure to raise the Nation’s debt ceiling—in reality, however, the deal simply suspends the current debt ceiling, giving the Federal government open-ended spending power through Feb. 7.

The Washington Post’s Ezra Klein explains how the government disregards the debt ceiling using an idea Senate Minority Leader Mitch McConnell’s office came up with in 2011:

The way it works is that the president gets the power to raise the debt ceiling and then Congress gets an opportunity to take a vote of “disapproval.” If that vote passes Congress, then the president can veto the disapproval rule. If Congress can muster the two-thirds majority to overturn the veto, then the president’s debt-ceiling increase is rejected.

In other words, the debt ceiling vote goes from a vote where a majority of Congress needs to vote in favor of it to a vote where up to two-thirds of Congress can vote against it.

We’ve been using the McConnell mechanism to raise the debt ceiling since 2011. If we made the McConnell mechanism permanent — something the Obama administration favors — it would basically disarm the debt ceiling forever. But last night’s deal didn’t make the McConnell mechanism permanent. It’s only valid until Feb. 7, 2014.

In other words, there is no limit to how much debt the government can accumulate between now and Feb. 7, and lawmakers have gotten away with allowing the country to take on debt and avoid the threat of default without ever being responsible for voting for debt limit increase.

“Suspending the debt ceiling without a dollar amount is further proof that Congress is taking a major step backward in fiscal responsibility,” David Williams, the president of the Taxpayers Protection Alliance, told The Daily Caller. “A real dollar figure is a constant reminder to taxpayers and Congress that the country is broke. This was done to hide the real debt from taxpayers.”

The United Kingdom’s gold exports to Switzerland jumped from 85 tonnes to 1,016 tonnes in the first eight months of 2013 — a twelve times increase. Some bullion market watchers attribute the huge increase to withdrawals or sales from ETFs — an explanation that covers only half the story…….if that.

Switzerland, according to the Koos Jansen website, has exported nearly 500 tonnes of gold to Hong Kong through July, 2013. Hong Kong, in turn, has exported over 1200 tonnes of gold to the Chinese mainland over the same period. Now, with this report of ramped-up exports from the United Kingdom, another piece of the puzzle falls into place and we begin to get a fairly clear picture what these gold mobilizations entail. Switzerland and Hong Kong are acting as a conduit of western gold on its way to China — and probably Chinese central bank reserves.

To what extent this gold mobilization is the result of some yet-to-be-identified external pressure on London’s bullion banks, or simply business as usual, remains to be determined, but gold movements of this size usually do not occur in a vacuum. Hedge funds have been in the gold ETF liquidation mode since April, at the behest, it seems, of certain bullion banks that have issued generalized ETF sell recommendations to their clientele (which includes the funds). The ETF selling has been blamed repeatedly for the rapid drop in the price. If all of this has been a ploy to drive down the price on paper and channel substantial amounts of physical gold to China, who is the winner in this game and who is the loser? And why is it being done?

" I would bet a lot of money that probably 90% of the Congressmen who voted "yes" on the Bill didn't even know that the Provision was in there."

Didn't Pelosi say "We have to pass the bill in order to find out what's in it" concerning Obamacare?

Can 90% of Congressmen and Congresswomen KNOW how to read?

Stupidity is not a handicap in politics, its practically a pre-requisite (just look at George Dubya Dumbass Bush-sh*t for brains or President Obozo)

Back to the matters concerning gold- We all know the London Gold Pool failed when their supply of gold was overwhelmed by demand.

The million-billion-trillion-zillion dollar question is: When will the bullion banks/governments/gold manipulators in the west run out of gold to force down the price?

I myself lived through the days (and decade) of when silver was stuck in the $4-$5 range and gold was falling almost yearly. I can wait for prices to go up but I am wondering when the forces of manipulation lose control and prices start going up.

As I posted below,most likely the 1/3T was the hidden amount that was swiped to keep the drive alive from one account and now put back .The minute the Debt limit is extended or lifted,such in this case,BINGO big jumps when no one is watching.U$ Generic media will not even talk about the true amount of the U$ Debt owing, or print the words $17TRILLION DOLLARS and growing like crazy!And what cracks me up is during all this,Gold is played on like a violin,constantly hammered on by we know who. Feb 7/14 the U$ will make a big show,and in the end the new limit will be 20TRILLION.Just say charge it!

Interesting.maybe findable with a search, but here it is all in one place timelined, with source links.China's currency swaps with other entities/countries since 2010 to this month:slides 13 & 14 (takes 2 to list it all).i tried to save it, but it prompts for a Login to save.

Thanks for the good post Dave.Watching the U$ Debt balloon over the last 6-8yrs has been amazing to say the least.No one wants,or knows how to take responsibility for such a HUMONGOUS amount.When the debt limit approaches,they stop the daily treasury report http://www.fms.treas.gov/dts/index.html while time is bought at the expense of raiding pension monies and such.Then when a new limit is announced,wallah the amount of hidden borrowing is piled on the new limit and a few months later adding $6-$800b defense budget in,and presto you have another TRILLION dollars added to the U$ Debt.What cracks me up is,the talk of having no debt ceiling,and that congress is responsible for its spending.I may have been born at night,but it was'nt last night.LOL! BIG TROUBLE ahead.

This guy with centuries of hard price data in his database, much of it manually inputed from magazines & newspapers, says the Gann 60-year is right over us, heading to some kind of "pulled through the vacuum" into 2014 (no overhead resistance, since at ATH in stock market).His commodity videos say same thing. Anything real up, paper down.This implies some unforeseen dollar drop. It is sitting on the lower BB= 2 standard deviation move just recently, so this would mean a multiple-SD move down, again to show technically what is completely unexpected here.

Then the next thing happened: Central banks were invented. What happened was that they took over the note-issuing monopoly. They were given, by the government, essentially a monopoly. In return for that, all of the banks within the central bank's system would take the gold that was originally deposited and move it into the central bank in return for – guess what? – deposit accounts and nice new bank notes.

So really what I wanted to do was to quantify that process [by creating the FQM]. It involved taking cash, all of these instant-access deposits, or deposits which are readily accessible, plus the deposits that the banks have at the central bank, because that is money just the same as your deposit account is in your bank; it is exactly the same in that sense. If you look at that, you get some very interesting statistics.

Going from 1960 to the month before the Lehman crisis in 2008, the average exponential growth rate was around about 5.9%, year in/year out. It followed that track very closely. Then of course we had TARP and all of the rest of it.

And then we had QE. And guess what? The level of fiat-money quantity is now over 60% above that long-term trend line. Now, if we stand back unemotionally and look at that chart, we would say that this is monetary hyperinflation.

Here we have this situation now where the Central Bank, the Fed, is having to produce money to finance the government deficit. It’s having to produce money to keep interest rates down so that the banks don't have balance-sheet problems. And if it slows down in that production of money, and even if it doesn't increase the rate of the production of that money, then our world is going to come to a rather nasty halt.

The blanket dissemination of the ideology of free market capitalism through the media and the purging, especially in academia, of critical voices have permitted our oligarchs to orchestrate the largest income inequality gap in the industrialized world. The top 1 percent in the United States own 40 percent of the nation’s wealth while the bottom 80 percent own only 7 percent, as Joseph E. Stiglitz wrote in “The Price of Inequality.” For every dollar that the wealthiest 0.1 percent amassed in 1980 they had an additional $3 in yearly income in 2008, David Cay Johnston explained in the article “9 Things the Rich Don’t Want You to Know About Taxes.” The bottom 90 percent, Johnson said, in the same period added only one cent. Half of the country is now classified as poor or low-income. The real value of the minimum wage has fallen by $2.77 since 1968. Oligarchs do not believe in self-sacrifice for the common good. They never have. They never will. They are the cancer of democracy.

Eric Arthur Blair aka George Orwell

"Hope" is not a valid investment strategy

Full Time Jobs Over Last 5 Years

Is Your Gold Missing?

Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Epic Quote - "Jesse" Sent This To Me

"The world will soon wake up to the reality that everyone is broke and can collect nothing from the bankrupt, who are owed unlimited amounts by the insolvent, who are attempting to make late payments on a bank holiday in the wrong country, with an unacceptable currency, against defaulted collateral, of which nobody is sure who holds title." - Anonymous

The Basic Fundamental Problem

What's the solution?

“THERE IS NO MEANS OF AVOIDING THE FINAL COLLAPSE OF A BOOM BROUGHT ABOUT BY CREDIT EXPANSION. THE ALTERNATIVE IS ONLY WHETHER THE CRISIS SHOULD COME SOONER AS THE RESULT OF A VOLUNTARY ABANDONMENT OF FURTHER CREDIT EXPANSION OR LATER AS A FINAL AND TOTAL CATASTROPHE OF THE CURRENCY SYSTEM INVOLVED.”

Ludwig von Mises – Austrian Economist (1881- 1973)

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie? JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

Priceless Quote From Richard Russell

On Larry Summers: This doofus practically ruined Harvard when he headed it. I can't think of a worse choice to be chief economic advisor. I wouldn't trust Summers to manage a Starbucks franchise.

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.

Quote of the Month

And very relevant in the context of yesterday's post about gold moving higher against all fiat currencies:

Just imagine what would happen if a mere ten percent of the money currently going into bonds were instead to go into gold. As in 1972, the real move has yet to begin.

- Murray Pollit, Pollit & Co.

A Picture Says It All...

www.moneyandmarkets.com

Golden ore samples produced by Eurasian Minerals

Undisclosed exploration site

The Next Reserve Currency?

1 oz. Chinese Panda

Guess who said this?

Rising prices of precious metals and other commodities are an indication of a very early stage of an endeavor to move away from paper currencies...What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment.

-Alan Greenspan, 9 Sep 2009

THIS is what REAL money looks like

1 oz. Gold Eagles

Alan Greenspan said what?

“Deficit spending is simply a scheme for the ‘hidden’ confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.”

From "Gold and Economic Freedom" a 1966 Essay by Alan Greenspan

About Me

I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for a large bank. I have an MBA from the University of Chicago, with a concentration in accounting and finance.
Currently I co-manage a precious metals and mining stock investment fund in Denver.
My goal is to help people understand and analyze what is really going on in our financial system and economy.